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Bank lending networks, experience, reputation, and borrowing costs

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  • Christophe J. Godlewski
  • Bulat Sanditov
  • Thierry Burger-Helmchen

Abstract

We investigate the network structure of syndicated lending markets and evaluate the impact of lenders’ network centrality, considered as measures of their experience and reputation, on borrowing costs. We show that the market for syndicated loans is a “small world” characterized by large local density and short social distances between lenders. Such a network structure allows for better information and resources flows between banks thus enhancing their social capital. We then show that lenders’ experience and reputation play a significant role in reducing loan spreads and thus increasing borrower’s wealth.

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Bibliographic Info

Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2010-16.

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Date of creation: 2010
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Handle: RePEc:ulp:sbbeta:2010-16

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Keywords: agency costs; bank syndicate; experience; loan syndication; reputation; small world; social network analysis.;

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  1. Di Cagno, Daniela & Sciubba, Emanuela, 2010. "Trust, trustworthiness and social networks: Playing a trust game when networks are formed in the lab," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 75(2), pages 156-167, August.
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Cited by:
  1. Meixing DAI, 2009. "External constraint and financial crises with balance sheet effects," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2009-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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